AI Equity Rout Deepens as KOSPI Enters Bear Market; CoreWeave Debt Distress Spreads

The global selloff in artificial-intelligence-linked equities accelerated sharply on Thursday, with South Korea's KOSPI entering a bear market and triggering trading halts, as mounting anxiety over the opaque financing structure underpinning the AI buildout drove investors into safe-haven assets.

The KOSPI fell 7.57% to 5,554.22 on October 15, its seventh consecutive daily loss and a decline of roughly 20% from its recent peak in barely a week, according to multiple reports. Circuit breakers known as sidecars were triggered on both the main KOSPI and the smaller KOSDAQ in morning trading. The exchange later halted trading on the main board for 20 minutes after the index fell more than 8% from the previous close. Foreign investors sold a net 3.62 trillion won (about US$2.7 billion) of shares, Rio Times reported.

Japan's Nikkei 225 dropped 4.90% to 64,425.95 on the same day, while the tech-heavy Nasdaq Composite in the US edged up 0.1% after a volatile session, with chip stocks falling for a seventh straight day — their longest losing streak in four years, according to Reuters.

The rout was driven by deepening concerns over the debt financing the AI boom. CoreWeave, a cloud provider heavily tied to AI infrastructure, saw its 2032 bonds — issued just four months ago — fall below 80 cents on the dollar, a level typically considered distressed debt, Reuters reported. The cost of insuring against default by major US AI firms soared to record highs, the newswire added.

**Anthropic Growth Slows, Gartner Warns on Impairment**

Adding to the pressure, Anthropic disclosed third-quarter revenue of $16.8 billion that implied slowing growth, according to Zero Hedge, which noted the figure failed to impress at a pre-IPO investor event. The same report cited a Gartner analysis warning that $3.5 trillion of AI infrastructure spending could be at risk of impairment by 2030.

Separately, reported progress by China's CXMT on next-generation DRAM architecture has undermined confidence in established memory manufacturers such as SK Hynix and Micron, Reuters reported. Samsung Electronics fell 9.48% and SK Hynix dropped 11.06% on Thursday, according to Rio Times, which also noted that South Korea's September chip exports hit a record US$60.5 billion, up 260.3% year-on-year — underscoring that the selloff reflects doubts about future profits rather than current demand.

**Treasuries Surge as Safe-Haven Flows Return**

Despite a surprisingly strong rise in US producer prices, Treasuries had one of their best days in months, with the 10-year yield falling 10 basis points to 5.08%, the lowest since September 23, Reuters reported. The rally extended across the curve in a bull-flattening move, with bund yields also falling 11 bps to 3.35%. The move showed that the safe-haven appeal of sovereign debt remains intact even as inflation data runs hot.

The dollar weakened, with the Bloomberg Dollar Spot Index down 0.3%-0.4%, while the Swiss franc strengthened 1% against the greenback, Reuters reported. Gold rose 1% to $4,158 and silver gained 3%, while oil was mixed — Brent crude flat and WTI up 3%.

**Rebound on Friday, but Fragility Persists**

Asian markets rebounded on Friday, with the KOSPI rising 2.1% to 5,668.05 and the Nikkei gaining 1.4% to 65,324.29, according to multiple reports. China's CSI300 edged up 0.1% after at least 10 AI supply-chain companies announced share buyback or stock purchase plans, Reuters reported. The Hang Seng rose 0.5%.

However, the rebound was uneven. Indonesia's Jakarta Composite Index recorded its biggest one-day fall since 1998, plunging more than 10% after MSCI warned that the country's stock market no longer merits "emerging market" classification, Reuters and Rio Times reported. The warning threatens to force passive funds to pull money from the country.

Fed Chair Kevin Warsh, speaking at the IMF/World Bank meetings in Bangkok on Friday, said he does not prejudge the outcome of policy meetings, according to Reuters. Markets currently price about 28% odds of a rate hike at the end of October, down from a post-CPI peak of 58%, Zero Hedge reported.

**Systemic Risk Remains in Focus**

The week's events have spotlighted the circular nature of AI financing, where capital expenditure is increasingly financed by debt, private credit and off-balance-sheet borrowing, Reuters noted. Credit markets are likely to lead equities, and the risk of a self-fulfilling doom loop — where selling in weaker names casts a shadow over healthier credits, forcing downgrades and further selling — cannot be ignored.

With tech earnings rolling out over the coming weeks and interest rate decisions from the Fed, Bank of Korea and other central banks on the calendar, analysts expect volatility to remain elevated. As Reuters put it, "calm returning after the frenzied AI-centred selling... the question is how long it can last."